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JOURNAL OF OPERATIONS MANAGEMENT

Vol. 6, No. 2, February 1986

Component Part Standardization:


An Analysis of Commonality Sources
and Indices

JOHN G. WACKER*
MARKTRELEVEN**

EXECUTIVE SUMMARY

The importance of higher component part standardization has been recognized as an important
area of empirical investigation since it has been hypothesized to reduce inventory levels by reducing
safety requirements, to reduce planned load through larger lot sizes, and to reduce planning
complexity through reducing number of items to be planned. Therefore, component part stan-
dardization offers considerable promise for managers wishing to improve their production capabilities.
In order to achieve higher standardization, measures indicating the degree of standardization are
necessary. The most traditional measure of component part standardization is the degree of
commonality index (DCI), which indicates the average number of uses per component parts.

Unfortunately, this measure has many theoretical limitations. First, it is a cardinal measure and,
therefore, cannot measure the degree of uncommon part numbers that frequently cause production
planning problems. Additionally, as a cardinal measure, it cannot be used to compare planning
across organizations and is not useful for making summary comparisons of planning complexities
across organizations. This study develops a relative index that has boundaries of standardization
between 0 and 1 corresponding to the lay language usage-each item being unique (no standard-
ization) and one item used everywhere (complete standardization).

A second major weakness of the DC1 is that it does not recognize sources of standardization for
decision making. There are at least three principal decisions on which component part standardization
indices can provide information: 1) within-product decisions, 2) between-product decisions, and
3) make-buy decisions. The within-product decision refers to using each component as frequently
as possible within each end item. This increased usage means fewer unique items within each end
item and is expected to reduce that item’s planning complexity. The between-product index is
used to examine the design of new end items. Its purpose is to give indications of additional
planning complexity by the increased number of new component parts. Hence, between-product
indices give information for reducing planning complexity with the introduction of new products.
This article develops these two types of indices to indicate the relative proliferation of new
component parts.

The make-buy decision involves indices that adequately describe manufactured versus made
components. For the manufactured components, the level index computes the commonality by
each product level of the bill of material. This index gives information for the design of a new,
more automated manufacturing system by analyzing each level’s standardization for possible

* Iowa State University, Ames, Iowa.


** University of Minnesota, Minneapolis, Minnesota.

Journal of Operations Management 219


inclusion into a more automated system (group technology, cell manufacturing, flexible manufacturing
system, or automated factory). For the buy decision, the indices developed here can be utilized for
reduction of the number of vendors due to “uncommon” components. Both level and buy indices
can be used for analyzing and reducing the planning complexity of the production system.

A third fundamental problem with DC1 is its lack of realistic dimensions of end-item volume,
quantity per assembly, and cost. The DC1 weights each end item precisely equally regardless of its
volume. Therefore, an item produced once every two years would be weighted exactly the same
as the best selling item. Similarly, the DC1 does not consider the quantity per assembly (Q/A) of
each component. Consequently, an item that had very small (Q/A) inside of an item has exactly
the same weight as a high (Q/A) inside an item. Last, the DC1 ignored the price of the component,
which further limits its usefulness by causing the DC1 not to have cost dimensions. This study
developed relative within-product, between-product, and total commonality indices that include
end-item volumes, quantities per assembly, and component price. These indices can provide
valuable insights for reducing relative planning complexities that improve system performance
through analyzing relative costs of component parts usages.

INTRODUCTION

The purpose of this article is to investigate the measurement of component part stan-
dardization. This paper will build on previous studies by Collier [2, 3, 4, 5, 61 and suggest
improvements in his Degree of Commonality Index (DCI). Collier has argued that com-
monality affects production system performance through work-in-process inventory, less
complex planning procedures, and more constant work loads. Additionally, he argues in-
creased commonality can help reduce costs through improved long term product structure
designs.
Collier’s research on commonality has provided some very promising results for operations
managers. Using a limited set of simulation experiments, his results indicate component
part standardization reduces safety stock requirements primarily through a reduction in
aggregate component usage variations [4, 61. His other research indicates that component
commonality reduces average planned load due to larger lot sizes and fewer setups. The
overall effect indicated total holding and setup costs were reduced for higher commonality
product structures [3, 51. In short, Collier’s research on commonality demonstrates that
component part standardization may offer promise for future operations systems through
better product designs. Although these results are impressive and indicate that component
part standardization is an important area for investigation, the DC1 has many theoretical
limitations.
Theoretically, the DC1 is a cardinal measure indicating the average number of parent
items for a component. This measure has the advantage of being capable of being tied
directly to safety istock measures [6]. However, as a cardinal measure, it has severe theoretical
limitations for its managerial application. These limitations include a lack of: 1) measurement
of the uncommon components; and 2) interorganizational comparability. Managers focus
on component part standardization not by commonality but by those items that are un-
common. It is these uncommon components that cause the traditional scheduling and
quality problems by being misscheduled or misdelivered. Additionally, the items are less
familiar to workers so quality problems are more likely to occur. Hence, a cardinal index
for common items loses its managerial significance since it does not indicate the relative
degree of commonality. The second severe shortcoming of cardinal indices is that they
should not be used for comparisons between different operating systems. This, once again,

220 APES
is because they do not indicate the relative commonality between the two systems. Hence,
statistical results on the system’s performance using cardinal commonality indices cannot
be expected to yield similar results in another organization having identical indices. In
summary, for a commonality index to be meaningful for analyses of organizations, it should
be ordinal so that it can indicate the relative degree of commonality.
A second fundamental problem is the decision-making purpose of the DC1 in an operations
environment. There are at least three separate component part standardization decision
types facing managers: 1) within product decisions, 2) between product decisions, and 3)
make-buy decisions. The within product decision type analyzes component part standard-
ization inside of one particular item. The managerial implication is that low within end
item component part commonality suggests the item may be a candidate for a careful value
analysis to reduce its number of unique items. The between product decision concerns
component part standardization between end items. It addresses the question of whether
the facility is capable of producing the new end item, as affected by the new end item’s
degree of commonality with existing end items. An associated decision of this type uses the
degree of commonality between sets of end items to decide which items are members of
the same family.
The make-buy type of managerial decision involves comparisons of purchased components
versus manufactured components. Purchased components’ relationship to the operating
system is primarily related to vendor decisions such as quality, quantity, and timing of
delivered items. However, for internally made components, the relationships to the operating
system are primarily workload, schedule expediting, etc. The DC1 is a summary measure
that confounds the two separate issues and is of little value for managers who wish to analyze
these issues separately.
A third fundamental problem with DC1 is its lack of realistic dimensions. The index, as
it is computed, ignores end-item demand. Even if a particular end item is only produced
once every several years, it would carry the same importance in the index as the best selling
end item. Similarly, the quantity per assembly is not used to weight the usage of components
within each end item. Another basic limitation concerns the price of the component. A
low-priced item may have excess inventory (and may follow the operations maxim “for C
items have plenty to avoid stock-outs” [7, 81). Yet, the more expensive items should be
more carefully controlled to remove mismanagement’s potential deleterious effects on in-
ventory performance. Therefore, excluding the component price causes the index not to
adequately reflect expensive and inexpensive items. Because of these three limitations, the
DC1 does not incorporate the most significant and realistic dimensions of traditional operating
systems.
In sum, the DC1 lacks the fundamental theoretical dimensions that are important for
production managers wishing to analyze their operating systems. However, with all the
promise of the commonality concept, improvements should be made in the commonality
index to increase its usefulness in operations managerial decision making. There are three
important, but separate, research projects that would be logical to improve on the com-
monality concept and applications. The first project would be to develop commonality
indices that would be more theoretically sound and more closely related to the actual op-
erating environment of managers. The second research project would simulate different
commonalities and estimate their statistical effects on traditional performance measures of
operating systems (on-time delivery, throughput time, quality, etc.). The third research

Journal of Operations Management 221


project would be a validation study using an actual manufacturing facility to test commonality
measures and their relationship to the actual system’s performance measures.
The purpose of this study will be to overcome the theoretical weaknesses of the DC1 and
develop alternative indices that can be used in future research projects. In short, the issues
are
1. What are boundaries of commonality indices?
2. What are the sources of commonality? These sources may be
l From within a single product structure.
l From adding new product structures.
l From across all product structures.
3. What are the differences in commonality’s importance between internally made and
externally purchased items?
4. How is commonality affected by changes in such variables as
l Purchase price of components?
l Quantity per assembly?
l Demand for end items?
This article will investigate these basic questions and propose measures of the different
types of commonality to delineate managerial implications in organizations. First, it will
suggest modifications to Collier’s degree of commonality index to make the index ordinal.
Next, it will investigate sources of commonality from within product structures, from between
product structures, and from different levels of the products. Third, it will develop com-
monality indices that reflect variability in quantity per assembly, purchase price, and end-
item volume. Appendix B will investigate the response of variable indices with changes in
quantity per assembly, purchase price, and end item volume.

COLLIER’S DEGREE OF COMMONALITY INDEX (DCI)


AND ITS BOUNDARIES

Collier [6] has suggested the DC1 as

;(I?
DCI = J=1 1rDCI~fi (1)
d
d
where 2 4 represents the number of immediate parents for each component and (d) is the
j=l

number of distinct component parts in the set of end items or product structures.’ The /3
d

is the value of the numerator, 2 @j, representing the total number of immediate parents
j=l

for all distinct component parts over a set of end items or product level(s). Therefore, the
boundaries of the DC1 are 1 and /3. When DC1 is 1, it represents no commonality. A value

’ Glossary of notation is provided at end of article. The notation used in this section is the same as that used by
Collier [6].

222 APICS
of /3 for the DC1 represents the highest possible commonality. The degree of commonality
index represents the average number of parent items per distinct component part. This
form of commonality index has a great deal of intuitive appeal. However, any particular
DC1 will not give an indication of how much increase in commonality is possible since it
is a cardinal measure. For comparisons between sets of products (product lines, product
groupings, etc.), it would be more useful to have a relative index that has absolute boundaries.
Therefore, this article will suggest a modified version of Collier’s index that is relative and
has an absolute limit. This modification is the total constant commonality index, TCCI,
represented by
d-l
TCCI=l- A (2)

The limits of this index range from 0 to 1, where 0 commonality represents no item being
used more than once in all the product structures and 1 represents complete commonality.
Complete commonality means that one component is used everywhere.’ These limits are
more in line with lay language: 0 commonality means there are no items that are common
and 1 means complete commonality (one item is used everywhere). This index is a relative
measure, showing the degree to which items are used elsewhere compared to the maximum
amount possible.
Figure 1 shows five commonality cases: I, II, and IV from Collier [5], Case V from Collier
[6], and Case III is a case developed for this study. The TCCI adequately represents com-
monality in these cases since it varies from zero in Case I where there are no common
components to one in Case V where one component is used everywhere.

COMMONALITY SOURCES AND IMPLICATIONS FOR INTERPRETATION


Collier’s DC1 is a measure of total commonality; it does not indicate the source of com-
monality. There are two apparent sources of commonality. These are 1) within-product
commonality and 2) between-product commonality.
Within-product commonality refers to (indicates) the degree to which parts are used
inside one product. When using total commonality indices, it is possible to derive all the
commonality from within one product and have no commonality derived between products.
The within-product constant commonality index is
di- 1
WCCIi= 1-r (3)
C *ij
j=l
di
where di is the total number of distinct items utilized in end item i and 2 @ijrepresents the
j=l
total number of immediate parents for all distinct components in end item i. This index is
computed as the total constant commonality index, TCCI, except that there are i of these
indices representing each distinct end item i. As with the TCCI, its limits are 0 and 1,
corresponding to no commonality and complete commonality, respectively.

2 Naturally, the TCCI carries no meaning in the case where there is only one use of a component and one parent
since 0 divided by 0 is undefined. However, this case is trivial in the real world.

Journal of Operations Management 223


FIGURE 1
Total Constant Commonality for Cases of End Items

CASE I CASE III CASE IV


Level

DC, =1+1+1+1 DC, = 2+1+3+2+3+1+1 DCI = 2+1+3+2+3


4 7 5
DCI = 1 .O DCI = 1.3 DCI = 1.8571 DCI = 2.2 DCI =12.0
TCCI = 0.0 TCCI = .40 TCCI = .5000 TCCI = .6 TCCl= 1.0
Zero commonality Complete commonality

0% commonality 100% commonality


Between-product constant commonality shows the degree of commonality when adding
an additional product. The basic question answered by this index is: How common are the
components of a “new” end item compared to currently produced end items? However,
this question must be expanded to consider all end items. One method of considering all
end items is to rate each end item in relative importance to organizational goals from most
important to least important (by Pareto’s ABC analysis, perhaps). Starting with the most
important end item and using its components as the component base, the question is asked:
How common are components of the second most important end item relative to the
component base? Then proceeding to the third, using end item one’s and two’s components
as the component base, asking: How common are the third end item’s components relative
to this new component base? By continuing this procedure through all end items, a firm
can use component commonality to evaluate end items and reduce the number of unique
component items. Additionally, the between-product constant commonality index can be
used to determine the degree of component part standardization between product groups.
The between-product constant commonality index, (BCCI,,,,), is

du
BCCI,,+l = 1 -d+du
C @j
j=l

where (du) is the number of uncommon components usages (compared to the current
d+du

component base) in the “new” (ni + 1) product (or product group) and 2 4j represents
j=l

the total number of component uses including those within the new item. A commonality
of 0 represents all component uses being unique and 1 represents complete commonality
with the existing end items.
However, the BCCI,,+i does not indicate what percentage of the new item’s components
are not common. A better index for this is the incremental constant commonality index:
du
ICCI”,,i = 1 -___
dc+du
where (dc) represents the common components and all other symbols have been previously
defined. This index, ICC&,,+, , is the percentage of “new uncommon” components of the
total components used in the “new” product. While the BCCI,,,, indicates the total com-
monality for “new” uncommon items, the ICCI,,,, indicates the incremental commonality.
These two indices complement each other and are inputs to “new” product adoption de-
cisions.
From Figure 1, Cases II, III, and IV will be used for examples. Case I (TCCI = 0) and
Case V (TCCI = 1) were considered trivial and, therefore, provided no further insights into
the indices. Table 1 shows the indices along with the total constant commonality index.
Column I shows that there is no within-product commonality for Case II, Items 1 and 2;
Case III, Item 2; and Case IV, Item 2. However, end-item 1 in Cases III and IV has some
degree of within-product commonality. In these latter two cases, at least part of the total
constant commonality was derived from the internal product structure of Item 1. From
these cases it can be seen that it is possible to derive a case where the total commonality
index is nonzero entirely due to within-product commonality. For example, in Case III, if

Journal of Operations Management 225


APICS
all components of end-item 2 were unique to both product structures, total commonality
(TCCI) would be 0.225.3 Therefore, using the total commonality index would give a wrong
indication if this result was an input to the new product adoption decision.
From Table 1, Columns II, III, IV, and V, the between-product constant commonality
index and the incremental constant commonality index give similar indications for the
simple product structures illustrated here. However, in more realistic environments with a
large number of product structures, the BCCI,,,, will be smaller than (or at least equal to)
the ICCI,,+r since it includes all currently used components. In these environments the
ICCI,,, I should be used as input to new product adoption decisions.
In short, organizations can use these commonality indices to investigate the source of
commonality for decisions on new product design (WCCIi) and new product adoption
(BCCI,,,, and ICCI,,+r).

CONSTANT COMMONALITY INDEX BY LEVEL

Another area of investigation is commonality by product level. Figure 2a (from Collier


[3]) and 2b (from Figure 1, Case III) show product structure cases of high commonality.
The first basic question is: How is commonality affected by the level of a particular com-
ponent? The second basic question is: What are the implications for level-by-level com-
monality?
Before going into a discussion on the computation and usefulness of this type of com-
monality, a modification of the product tree is necessary for calculation purposes only. This
modification is necessary to put common components on the same level. The easiest way
to achieve this is by moving all externally ordered items to the lowest level possible along
with their parents. In Figures 2a and 2b, this modification is shown.
For calculating the level-by-level commonality, the product level constant commonality
level index is
dg- 1

where g is a particular level across all product structures, dg represents the distinct number
of components at level g, and L(g) is the index set of distinct items at level g. Table 2 shows
these product level constant commonality indices level by level. One thing is immediately
apparent: the lower the product level (higher level number), the higher the component part
commonality. This result is not a fluke of the selected product structures since, in general,
component parts may be used in different higher level items (for example, end items), but
usually higher level items are made out of a unique set of components. Hence, commonality
increases as one moves down in the product structure.

3 This case is:

Journal of Operations Management 227


FIGURE 2a
Modification of Product Trees for Case III

CASE III

DCI = + = 1.8571 TCCI = .5000

FIGURE 2b
A High Commonality Case for Commonality Indices by Level

Level

0 2
Q
0
ai1
5
06

0 0 9 10 1

DCI = 2.5
x”d
11

l4
13

15
11

l4 l4

TCCI = .6027
12

15 14
12

15
13

15

The implications, from this analysis, are very important for two pragmatic reasons: 1)
lowest level items are purchased items and 2) higher level commonality implies a more
continuous production environment because they are internally produced items.
High commonality for the lowest level purchased items has several very important im-
plications for operations management. Most obviously, higher commonality means higher
volume and a greater probability of quantity discounts. Also, higher purchased part com-
monality means fewer purchased component parts and, therefore, allows purchasing man-
agers the possibility of closer vendor evaluation. This closer vendor evaluation facilitates

228 APICS
TABLE 2
The Product Level Constant Commonality Index (LCCI,) for Figure 1 Cases II, III,
and IV and Figure 2b
Figure 1
Figure 2b
Level Case II Case III Case IV

0 0.000 0.000 0.000 0.000


1 ,500 so0 ,500 0.000
2 ,500 ,556 ,714 .400
3 .625
4 .909

TCCI, ,400 ,500 ,600 ,603

better quality control through programs such as vendor certification. Further, with fewer
purchased parts, operations personnel can become more familiar with each item and have
better internal quality control procedures for these items.
For production planning purposes, more commonality of purchased items carries two
related important implications. First, it provides for greater flexibility in producing end
items through a reduction in material planning’s dependence on forecast errors and, thereby,
a reduction in safety stock requirements. At the extreme, if throughput time is 0 (or very
low) and purchased part commonality is 1 (all end items are made from one component),
then maintaining a safety stock for this one component would provide a buffer against all
product (end item) specific forecast errors. Therefore, product specific forecast errors would
not be important for material requirements planning since only aggregate levels of forecast
would be necessary.
A related production planning implication of higher purchased part commonality is de-
rived from alleviating stockout problems. More commonality is an indication of fewer
uncommon components. In conversations with practitioners, practitioners feel that the
longest production delays occur when uncommon purchased parts suffer stockouts. Con-
sequently, higher commonality for purchased parts indicates fewer uncommon component
parts and less likelihood of stockouts and subsequent long production delays.
Another major area of managerial implications involves higher level component part
commonality. Higher level commonality suggests which components may be candidates
for group technology (GT), flexible manufacturing systems (FMS), and automatic manu-
facturing systems (AMS) [ 11. From the five cases in Figure 1, it is apparent that Item 2 in
Cases II, III, and IV, is such a candidate. However, Figure 2b is a more interesting case.
The highest level where there is any commonality is Level Two, where Components 7 and
9 are common. If group technology, a felxible manufacturing system, or an automatic
manufacturing system were instituted to build these two items, the only items on Level
Two that would be unique are components 8 and 10. Studying Level Three, it can be seen
that Components 11, 12, and 13 make up Components 8 and 10. However, 11 and 12 could
both be made by the automated system (GT, FMS, or AMS) that could be making Com-
ponent 9. Also, Item 13 could be made by the automated system that could be making 7.

Journal of Operations Management 229


Therefore, all components on Level Three could be part of an automated system if the
system were properly designed. This shows that the higher level commonality index can
serve to analyze systematically product structures for automation.
This study proposes that one of the most challenging aspects of commonality is the
possibility of designing highly common items manufactured by GT, FMS, or AMS that can
be assembled to produce a wide variety of end items. Although this has always been a goal
of manufacturing systems, it now appears there is a mechanism with which to analyze this
problem. The empirical question is: Which level is the best place to begin automation? In
the cases used in this study, when the items that were common were removed from the
planning system, the remaining items were uncommon. At the next lower level, these un-
common items could be added to existing common item production. This analysis led to
the conclusion that commonality should be analyzed downward from the top of the product
structure trees.
Having acknowledged the importance of this topic, it is left to be thoroughly investigated
in future research. The remainder of this article will continue to investigate commonality
for purchased parts. Appendix A provides alternative forms of the constant commonality
indices.

COMMONALITY INDICES FOR PURCHASED PARTS

In the above analyses, the computed commonality index was considered for all level
items below the zero level. Actually, internally made and externally ordered components
can each have all of the previously defined indices: within-product constant commonality
index, WCCIi; between-product constant commonality index, BCCI,,+i ; incremental con-
stant component commonality index, ICC1 ,,,+i; and total constant commonality index,
TCCI. Since the remainder of this article will examine the externally ordered component
commonality, all terms within these indices are henceforth redefined to refer only to purchased
parts.
Table 3 shows the value of these indices for Figure 1: Cases II, III, and IV. Since, by
definition, there are no components on any levels below these purchased parts, using the
logic presented earlier in the discussion of the constant commonality index by level, LCCI,,
these indices are at least as large as the constant commonality indices that use all levels
below the end item. Examples of purchase part commonality indices using Case III,
4-l
End Item 1 are WCCI.III.1 = 1 - G= .4000 , BCCIi = 1 - 6 = .9 ,
)(
5-l
ICCI,=l -:=.8333 TCCI=l--= 5556 for total commonality consid-
lo- 1

ering both end items.

VARIABLE COMMONALITY INDICES

As previously discussed, the weaknesses of constant commonality indices (CCIs) severely


limit the value of their information for managerial decisions due to lack of inclusion of
quantity per assembly, component price, and end-item demand. The purpose of this section
is to examine alternatives to CCIs and suggest how they may be used. This section will

230 APES
TABLE 3
Purchased Part Constant Commonality Indices for Figure 1, Cases II, III, and IV
Column I Column 11 Column III Column IV Column V Column VI
WCCI, BCCI** BCCI,** 1cc12* 1cc1,** TCCI

Case II, End Item I I -~=0.000 N/A l-+67 N/A 1-+oo 1-;=soo

Case II, End Item 2 N/A 1 -y= 1.000 N/A 1-p= 1.000 N/A

Case III, End Item I I -;=.400 N/A 1-+j=.900 N/A l-i=.833 l-;=.556

Case III, End Item 2 I-3-1=0.000 l+.900 N/A l-$750 N/A


3-l

Case IV, End Item 1 I-;=.500 N/A l-i= I.000 N/A I -y= 1.000 l-$714

Case IV, End Item 2 l-;=0.000 I+ 1.000 N/A 1 -s= 1.000 N/A

N/A = Not applicable.


* Assuming end item I “most important.”
** Assuming end item 2 “most important.”
consider purchased parts for: a) within product commonality, b) between and incremental
product commonality, and c) total measures of commonality.
For within-product purchased parts, commonality represents how much value within a
given product is due to common components. Therefore, this commonality should consider
both quantity per assembly and purchase price. However, the volume of the end item need
not be considered since it is constant within a given product. The suggested index is:

5 (PjAz)- 1
WCIi = 1 - i:‘n, x: 2 Xijh v i,j,h (7)
2 2 PjXijh- 1
j=l h=l

where Pj is the purchase price of item j and Xijhis the pegged quantity per assembly (multiplied
through levels of the product tree) of the j’” item used in the ith product through the parent
h. The PjAG represents the largest dollar usage of the j’” component in the ith item. There
are n, final products, nz distinct purchased components, and n3 pegs to higher level items.
There is no theoretical difficulty with the denominator of the second term in the index
since it represents the summation of quantity per assembly times component purchase price
for each component. Therefore, this term represents the total material purchase cost for the
item. The numerator, however, has a minor problem since its comparison base set of pur-
chased items for a given end item will make the index larger or smaller, depending on the
base chosen. Since the largest cost usage of any component is the most important, each
purchased component will have its largest cost usage as the comparison base in the numerator.
Consequently, this index indicates the degree to which the item is designed to make use of
common components by total components’ value. Hence, managers can use it for analyzing
whether a particular end item is adequately designed.
The between product and incremental constant commonality indices also require mod-
ification to take into consideration component purchase price and quantity per assembly.
Since multiple end items are involved with these indices, end item volume must also be
considered. The between-product variable commonality index for adding the (n, + l)‘h end
item is:
n*+n4 nj+n5
C C PjLl+l,jhQnI+l

BCI,,,, = 1- j=“‘o::;,;;;;,,+,, (8)


G C C PjbjhQi

izl j-1 h=l

There are n4 new distinct purchased components by adding the (nj + l)‘h end item, and n5
new pegs to higher level items in the (n, + l)‘h end item. This index represents what the
percentage of common purchase cost (compared to total purchase cost) would be if a new
item is added at some projected volume (Q”,+i).
The corresponding incremental product variable commonality index for adding the
(ni + l)‘h item is:
n2+n4 n3+n5
C 22 PjXnl+l,jh
ICI,,+1 = 1 -j;;;;; hn;:;;l (9)
C t: PjXnl+l,jh
j=l h=ng+l

232 APES
where all terms have been previously defined. This index represents, in costs, the percentage
of the new item’s components that are common with items currently carried in inventory.
These two indices serve different decision purposes. The between item index shows the
new product uncommon component “risk” in relationship to “total” cost (including the
component base’s cost) and the incremental index shows the uncommon component “risk”
involved as a percentage of the standard cost of the new item. Together the BCI,,,, and the
ICI,,,, give operations managers information on the degree of “risk” involved in a new
product adoption decision. These indices also provide managers information about product
design problems due to lack of commonality with current product structures.
The last of the four constant indices, the total constant commonality index, also requires
incorporation of price, quantity per assembly, and end-item volume information to make
it more meaningful to operations managers. The resultant total variable commonality index
is:
n1 n2
C C Pj(hjQJ* - 1

TCI = 1 _ ;;‘;&
(bjQJ* 2 hjhQj If h,i,j (10)

C C C pjbjhQi- 1

i=lj=lh=(

where (X,Qi)* represents the largest usage of the jth component over all final products i.
Note that this index also uses the largest quantity per assembly across all products for the
numerator of its second term. This index represents the degree to which common purchase
costs have been considered across all products.
Before going into the managerial implications of these indices, an important point must
be made. Each index collapses into its corresponding externally purchased component constant
commonality index, fall prices, all quantities per assembly, and all end-item volumes are
set equal to one.

MANAGERIAL IMPLICATIONS OF THE COMMONALITY INDICES

This article presents the commonality index as an important measure that can give in-
formation to analyze product structures. In addressing the weaknesses of Collier’s DCI, this
study analyzes the traditional constant measure of commonality and illustrates how the
sources of commonality have different managerial implications. The within product constant
commonality index is used to show how frequently a particular item is used within one end
item. This commonality index could be used as a guide in standardizing components so
that each end item makes maximum use of its own common items. To managers, this could
mean a reduction in the number of specialized tools needed for fabrication and assembly.
The between and incremental product indices can be used to show the degree of “risk” due
to using “uncommon” components. These risks include potential production planning,
purchasing and quality problems associated with the introduction of a new end item. These
indices can be used by managers to predict production difficulties from new product designs.
The level-by-level constant commonality indices can be used for changing product designs
to improve production techniques, including movement toward more automated procedures
(F&IS, etc.). The externally ordered (purchased) parts indices can be used to predict vendor
commonality problems associated with quality assurance, delivery performance, and quantity
discounts.

Journal of Operations Management 233


The variable commonality indices were introduced to aid managerial decisions that are
important in relationship to cost, component usage, and end-item volume. For operations
managers, each of the indices serves to improve decisions since each index provides relative
cost information for current production evaluation and new product adoption decisions.
Commonality measures are at least as important for service industries as manufacturing
industries. Consider the restaurant industry, where freshness of components is a key element
of quality. Higher commonality of purchased items indicates higher volume and more
freshness of these items. By carefully designing their products (menu items), they can improve
quality as well as production techniques. The authors feel that if almost any organization
is carefully analyzed, commonality measures can have pervasive effects giving managers
better indications of how to evaluate and improve their organization’s performance.

CONCLUSIONS

This article has carefully analyzed commonality measures. However, this study is just a
beginning from which future research can build. Future research should show the relationship
between commonality and the operating behavior of organizations in such areas as the
hierarchical lot-sizing, quality improvement programs, production planning, capacity plan-
ning, and just-in-time systems. Using simulation methods, these commonality measures
should be used to evaluate “real world” organizations for possible improvements in their
production systems through more component part standardization.
Component part standardization and its measures carry important managerial implications
for modern operating systems in their efforts to improve productivity. It was toward this
goal that this article was written.

GLOSSARY OF TERMS
(In order of appearance in paper)

1. d = total number of distinct components

2. fi = 5 a1 number of immediate parents for all distinct component parts over


@j c tot
j=l a set of end items or product levels
3. j = component parts subscript
4. di = total number of distinct components in end item (i)
5. i = final product subscript

6. 2 @ij = total number of immediate parents for all distinct components in end item (i)
j=l

7. nl = number of final products (end items)


8. n2 = number of distinct component parts (this term is also (d) as defined by
Collier, [6])
9. du = total number of distinct uncommon components for the (n, + 1) item
10. dc = total number of distinct common components for the (n, + 1) item
11. g = particular product level across all product structures
12. dg = total number of distinct components at level (g)
13. L(g) = index set of distinct items at level (g)
14. Pj = purchase price for the j” item

234 APES
15. hijh = pegged quantity per assembly multiplied through all levels of a product tree of
the jth item used in the ith product through the parent (h)
16. h = the (peg) between a particular end item and component through a particular branch
of a product tree
17. PjXz = largest dollar usage of the jth component in the ith item
18. n3 = number of parents
19. n4 = new distinct purchased parts by adding the (n, + 1) item.
20. n5 = new distinct pegs to higher level items by adding the (n, + 1) item.
21. Qn,+l = estimated volume of end item (ni + 1) over some specific time period.
22. (X,Qi)* = largest usage of item (j) over all end items (i).
23. yii = a binary variable determined by whether the j” component is used in the ith end
item (used only in Appendix A)

REFERENCES

I. Bylinsky, G. “The Race to the Automatic Factory.” Collier, D.A. “The Measurement and Operating
Fortune. 21 February 1983, pp. 52-64. Benefits of Component Part Commonality.” Deci-
2. Collier, D.A. “A Product Structure Measure: The sion Sciences, Vol. 12, No. 1 (1981) pp. 85-96.
Degree of Commonality.” In Proceedings of the Collier, D.A. “Aggregate Safety Stock Levels and
Tenth National AIDS Meeting. St. Louis, 1978. Component Part Commonality.” Management
3. Collier, D.A. “Planned Work Center Load in a Ma- Science, Vol. 28, No. 11 (1982), pp. 1296-1303.
terial Requirements Planning System.” In Proceed-
Orlicky, J. Material Requirements Planning. New
ings of the Eleventh National AIDS Meeting. New
York: McGraw-Hill Book Company, 1975.
Orleans, 1979.
4. Collier, D.A. “Justifying Component Part Stan- 8. Wight, O.W. Production and Inventory Management
dardiition.” In Proceedings of the TwelJh National in the Computer Age. Boston: CBI Publishing Com-
AIDS Conference. Las Vegas, 1980. pany, Inc., 1974.

APPENDIX A: ALTERNATIVE FORMS OF SUGGESTED


COMMONALITY INDICES

Constant Commonality Indices

In the text there are four constant commonality indices: the within-product con-
stant commonality index, WCCIi; the between-product constant commonality index,
BCCl,,+ I ; the incremental constant commonality index, ICCI,,+r ; and the level constant
commonality index, LCCI,. Collier’s DC1 represents average usage of each component part.
Each index developed here also has a counterpart that represents average usage: the within
average constant commonality index, WACCIi; the between average constant commonality
index, BACCI,,,, ; the incremental average constant commonality index, IACCI,,,, ; and
the level average constant commonality index LACCI,. Each of these indices represents the
average number of places (uses) where each component is used.
The Within-Average Constant Commonality Index, WACCIi, is defined as:

;+ij

W/,CC& = ‘=l
(A-1)

Journal of Operations Management 235


The Between Average Constant Commonality Index, BACCI,,,, , is defined as:
n2+n4
C @j
j=l
BACCI,,,, = ~ (A.2)
dc+du
The Incremental Average Constant Commonality Index, IACCI,,+I, is defined as:
n2+%
C @j
IACCI,,, , = ‘=n,+l (A.3)
du
This index is undefined when all component items for the (n, + l)‘h end item are common.
The Level Average Constant Commonality Index, LACCI,, is defined as:

$ @j

LACCI, = ‘EL(g)
(A.4)
&

where all symbols were previously defined.


Global Commonality Index

Another possible index is a global constant commonality index, GCI, that represents the
average number of different end items in which a component part is used. This index is:
n1 n1

C C Yij
GcI = 1 _i=lj=l
(A.9
d-l
where yij is set equal to one if component j is used in end item i and zero otherwise. This
index indicates the degree to which component items are used in different end items.
Variable Average Commonality Indices

These indices measure the average dollar usage per unique purchased part number. These
indices are: the within average commonality index, WACIi; the between average commonality
index, BACI,,, I ; the incremental average commonality index, IACI,,,, ; and the total average
commonality index, TACI. The within average commonality index is:
“2 n3
C C pj&jh
WACI, =j=l h=l
1 (‘4.6)
4

The between and incremental average commonality indices are:


n,+1 n2+nq nj+ns

C C C Pjbj”Qi
BACI,,+, = i=l j=l h=l
(A.7)
dc+du
nz+n4 n,+n5

C C PjLI+I,jhQn,+I
j=nl+l h=n3+1
IACI,,,, = (A.@
du

236 APICS
This latter index, IACI,, + 1, will be undefined if all component items for the (n, + l)‘h
end item are common. The total average commonality index is defined as:
“I n2 n3
C C C PjhjhQi

TACI = i=l j=l n=l


(A.9)
d

APPENDIX B: THE LIMITS AND THE RESPONSE CURVES


FOR VARIABLE COMMONALITY INDICES

The Limits of Commonality Indices with Respect to Changes in Variables

The purpose of this section is to investigate how each of the suggested indices respond
to changes in their variables. Recall the within-product commonality index:

WC1 = 1 - n:=1*3 hz 2 xij v i,j,h (B.1)


2 2 PjXijh- 1
j=l h=l

Holding all quantities per assembly constant at one, all other (Pj)‘S constant at one, and
varying any particular Pj reveals that as any Pj - co, the WCIi collapses to ( 1 - l/(number
of uses of the jth component). Alternatively, as Pj - 0, the WCIi collapses to the constant
commonality index WCCIi as if the component was not used.
By varying the quantity per assembly for any given component j and any particular peg
h, the following limits will be found: as Xijh 4 CO, Xijh 4 hz and WCIi -+ 0. Alternatively,
as Xijh A 0,
d-l
WCIi+ l- di
2 @ij - 2
j=l
i!
In short, the within-product commonality index decreases to show no commonality if there
is an extremely high usage, Xijh -of a particular component.
co, Alternatively, if component
usage is small through a peg h, Xijh- 0 the index indicates commonality as if the component
was not used for that parent.
Therefore, when price or quantity per assembly for a particular component dominate
the index, in terms of cost and usage, the index falls to reflect loss in commonality.
Recall the between-product commonality index as:
Qfnq ns+ns
C C PjLl+l,jhQnl+l

BCI,,,, = 1 -j=n;;:;;;;;;n3+n, (B-2)


C C C PjbjhQi

i=l j=l h=l

The numerator of the second term represents the uncommon cost for the (n, + l)‘h end
item and the denominator represents the total cost for all items. As any element of this
index’s numerator (the uncommon cost) goes to infinity, the index collapses to zero since
the second term collapses to one. As the numerator of the second term goes to zero, the

Journal of Operations Management 237


index collapses to one. However, as the new end item volume increases, Qn,+r - co, the
value of this index approaches that of the incremental commonality index (discussed next).
This means that the new product is becoming the dominant product in the tirm. Additionally,
the new overall commonality index (TCI) will move in the same direction as the incremental
commonality index.
The incremental commonality index is:
tlZf”4 n3+n5
C C pjL,+l,j
ICI,+1 = 1 -;;:‘n;‘n:=+“n’:’ 03.3)
C C Pjb,+l,jh
j=l h=ns+l

Its value corresponds to the degree of uncommon cost used in the new end item. As the
price for an uncommon component goes to infinity (Pj - co, j E n4), the index collapses
to the percentage of the total number of places the component is used in the new item.
Similarly, as pegged quantity per assembly for an uncommon part increases (Xijh - co,
j E n4), the index collapses to zero.
The total commonality index is:
n1 nz
C 2 PjxiQi- 1
TCI = 1 - n,i=;;=;, x:Qi + hjhQi v h,i,j 03.4)
C C C PjhjhQi- 1

izlj=lh=l

There are two noteworthy characteristics of this index. As any one end item becomes dom-

TABLE B.l
Cases and Product Structures That Exhibit Constant Estimated Commonality
Product Structures Value of
Within-Product Commonality WCIi (End Items) Commonality
Case I I, 2 0.0
Case II 1, 2 0.0
Case III 2 0.0
Case IV 2 0.0

Within-Product Commonality BCI.,,,


Case I 1, 2 0.0
Case II 1 adding 2” 1.0
Case IV I, 2 I.0

Incremental Product Commonality ICI,,,,


Case I 1, 2 0.0
Case II 1 adding 2” 1.0
Case IV 1, 2 1.0

Total Product Commonality TCIi


Case I 1, 2 0.0

’ If End Item 1 is the “most important,” adding End Item 2 will result in complete commonality. However, if
End Item 2 is the “most important,” adding End Item 1 will result in Component 6 as an uncommon item.

238 APICS
TABLE B.2
Limits of Within-Product Index (WCI) Showing Changes in Prices (Pi) and Quantity
per Assembly (A,“)

inant, the index collapses to the within-product commonality index. Also, if any component
item becomes dominant through one peg, Xijh, the index collapses to zero.

Empirical Examples of Variable Commonality with Limits and Response Curves

Table B.1 shows the cases for products that exhibit no variations in the commonality
indices and, consequently, were considered trivial and are not included in the subsequent
analysis.
Table B.2 shows changes in WC1 for Cases III and IV, End Item 1 (represented by WCI.III.1
and WCI.IV. 1, respectively). Changing the price of any component from zero to infinity
causes the within-product index to vary as if there was no usage of the component (when
the price equals zero) to one minus the reciprocal of the number of uses (when the price

FIGURE B.l
Changes in the Within Commonality Index: Case 3, Item 1 (WCI.III.l)
for Changes in Price (P5)

500

WCI,

Journal of Operations Management 239


FIGURE 8.2
Changes in the Within-Product Commonality Index: Case 3, Item 1 (WCI.III.l)
for Changes in Quantity per Assembly of Item 5 (Xqs3)

.ooo
0 100
x:5

equals infinity). In the extreme case, when there is one common component (as component
five) and it has an inordinately high price (compared to other components), the index should
indicate complete commonality since component five is used as much as possible. However,
the (WCIi) indicates it is being used only half as often as possible (WCI, = .5000 = 1 - l/
number of uses). This case indicates an apparent weakness of the index. But this case is
believed to be rare in the “real” world. This weakness is not apparent if there is more than
one high priced component since the index will respond to show the multiple dominant
prices. Table B.2 also shows that as any particular quantity per assembly increases toward
infinity, the index moves toward zero. The index, therefore, shows that a dominance in
usage of any one item causes the index to decrease. Consequently, a miniscule common
usage within an end item is not given equal weight with a balanced usage.
Since the changes of the WCIi in response to changes in price, Pj, and quantity per
assembly, Xijh,are nonlinear, a response curve is used to illustrate these changes. Figures
B. 1 and B.2 show the response curves for WCI.III.1 with changes in the price, Ps, and

TABLE B.3
Limits of Between-Product Commonality Index (BCIJ With Changes
in End Item l’s Volume (Q1)
Adding Q, Adding Q,
At 0 At co

BCI.II.1 1.000 so0


BCI.III.1 1.ooo ,833

240 APICS
FIGURE 8.3
Changes in the Between-Product Commonality index: Case it adding End Item 1 (6CLll.l)
with Changes in ERCI Item t’s Volume (0,)

quantity per assembIy, X1s3,for common Component 5 in Case III, Item I. The response
curves indicate that the WCI reacts to changes in price and quantity per assembly in the
aforementioned manner.

FIGURE 8.4
Changes in the 6etween-Product Commonaf~ty Index: Case Ill Adding End Jtem 1
(8Cl.lll.f) with Changes in End Item l’s Vdume (Q,)

1.000

BCI,

333

Journal of Operations Managemant 242


TABLE B.4
Limits of Incremental Product Commonality Index (ICIJ With Changes in Price (Pj)
and Quantity Per Assembly (Air”)
Changing Price Changing Quantity Per Assembly

Uncommon Uncommon
Common Common
Component 5 Components 6 Component 5 Components 6
or 9 or 9

At 0 At co At 0 At co At 0 At az At 0 At cc

IC1.11.2 0.000 1.ooo 1.000 0.000 1.oOO 1.000 1.000 0.000


IcI.III.2B .667 1.ooo 1.ooo” 0.000” .667 1.oOO 1.000” 0.000”

’ Adding End Item 2 to currently produced End Item 1 (Component 9 is uncommon).

Turning now to the between-product commonality index, BCI,,,, , this index shows the
additional uncommon component risk involved by adding a new end item. Cases 11 and
III are interesting to consider as examples of the response curves for changes in quantity.
Both of these cases were considered with End Item 2 being the “most important” and then
adding End Item 1. Table B.3 shows the limits by varying the volume of End Item 1, and
Figures B.3 and B.4 show the corresponding response curves as the volume of End Item 1
varies between 0 and 100. These curves indicate that as the volume of End Item 1 increases,
the BCI,,,, collapses to the ICI,,,, to represent the cost percentage (of total cost) attributable
to current common components. Therefore, as the new end item volume increases, the
BCI,,+I moves in the direction of the incremental commonality index ICI,,+, . This result
is interpreted to mean that as the use of uncommon components increases, operating man-
agers may run into additional planning problems due to new vendors, and so forth.
Similarly, Table B.4 shows the ICI,,,, for adding End Item 1 to currently produced End
Item 2. The results suggest that as common component cost usage increases (from purchase
price or from quantity per assembly increases), the ICI,,+i increases to reflect the increase
in common cost. Alternatively, as the uncommon cost increases, the ICI,,,, falls to reflect
the lack of commonality.

TABLE B.5
Limits of Total Commonality Indices (TCI) for Changes in Price (Pi), Quantity
per Assembly (XGh),and Volume (Qi)
Common Uncommon Common Uncommon Common Uncommon
Price 5 Price 6 or 9 x, hij QI Q2

At 0 At co At 0 At co At 0 At co At 0 At co At 0 At co At 0 At co

TCI.11 0.000 1.000 1.000 0.000 0.000 0.000 1.000 0.000 0.000 0.000 0.000 0.000
TCI.111” ,500 .661 ,625” 0.000” .600 0.000 .625” 0.000” 0.000 ,333 0.000 0.000
TCLIV ,500 ,667 N/A N/A .661 0.000 N/A N/A 0.000 .400 0.000 0.000

N/A = Not Applicable.


’ Uncommon price and quantity set for component eight.

242 APICS
FIGURE 8.5
Changes in Total Commonality Index: For Case III (TCLIII) with Changes
in End Item l’s Volume (0,)

.556

TCI

.400 a

01 100
(TCCI where Q, = 1) Q,

Table B.5 shows the total commonality index (TCI) for changes in common and uncom-
mon component purchase prices and quantities per assembly. These results are similar to
the within-product commonality index, WCIi . AS common (uncommon) cost increases, the
commonality index increases (decreases). However, as the volume of any end item increases,

FIGURE 8.6
Changes in the Total Commonality Index: Case IV (TCLIV) with Changes
in End Item l’s Volume (Q,)

,714

TCI

01
(TCCI where Q, = 1)

Journal of Operations Management 243


the index moves in the direction of the within-product commonality index, WCIi, for the
end item that has the increased volume.
Figures B.5 and B.6 show how the commonality responds to changes in demand of End
Item 1 for Cases III (TCI.111) and IV (TCI.IV) respectively. These figures show the total
commonality index collapsing into the WCI, as the volume of End Item 1 increases. First,
the index rapidly rises to the TCCI at Q, = 1 and then falls to the WCIi as Q, increases.
At Q, = 1 the usage is “most balanced” since all items have equal usage and, consequently,
commonality is the highest. Increases in end item volume of those items that have high
within-product commonality (WCIi), increases the overall total commonality index (TCI).
From a managerial perspective, a volume increase in a high within-item commonality should
increase the commonality.
Therefore, total commonality has several basic sources, the within-product commonality
and the between-product commonality, which in turn are affected by purchase prices, quan-
tities per assembly, and end items’ volumes. Using total constant summary measures of
commonality could give wrong indications about the actual degree of commonality.
In summary, all four of these variable commonality indices seem to respond adequately
to changes in variables to give an adequate overall picture of component part commonality
and its sources. These measures give a better indication of component part standardization
than constant measures that do not reflect the relative value of components.

244 APES